Cisco posts jump in sales, strong outlook
09-08-2006
by Maxim Kelly

Network equipment manufacturer Cisco Systems has posted better-than-expected earnings and predicted strong future sales.

Cisco reported sales for its fourth fiscal quarter ending in July of USD7.98 billion, up from USD6.6 billion for the corresponding quarter last year. This contributed to an annual sales total of USD28.5 billion for 2006 compared to revenue of USD24.8 billion for fiscal 2005.

On the back of the increase in sales, quarterly profits rose by a small overall increment to USD1.544 billion, or USD0.25 per share, compared with USD1.540 billion, or USD0.24 per share in the year-ago quarter. Figures for the latest quarter included stock-based compensation expenses and employee stock purchases.

Annual profit for 2006 based on generally accepted accountancy principles (GAAP) was USD5.6 billion, or USD0.89 per share, compared to USD5.7 billion (USD0.87 per share) the previous year.

Although Cisco, which currently employs around 50 staff in Ireland, generally concentrates on its core business of network routers and switches for business and telecoms networks, the company's acquisition of cable set-top box manufacturer Scientific-Atlanta in February marks a shift of emphasis into the consumer market. In its financial statement, Cisco said its new arm contributed USD582 million to net sales for the fourth quarter of fiscal 2006.

More recently, during the fourth quarter of fiscal 2006, Cisco completed the acquisitions of Audium Corporation and Metreos Corporation, and purchased selected assets of OpGate.

According to Reuters, Cisco's shares have fallen around 10 percent over the past 12 months amid concerns about consolidation in the telecommunications industry. However the BBC reported that the company's shares surged nearly 10 percent on the New York Stock Exchange after its financial results were released Tuesday night.

Cisco's forecast of a continuation of strong sales in the upcoming first fiscal quarter of 2007 may have increased confidence. Cisco is forecasting sales growth of between 19 percent and 21 percent in the current quarter, and it also expects growth of between 15 percent and 20 percent in the 12 months to the end of June, 2007.

"We are very pleased with our performance for the fourth quarter and fiscal year 2006," said Dennis Powell, chief financial officer at Cisco Systems. "Revenue for both Cisco stand-alone and Scientific-Atlanta exceeded our expectations this quarter, highlighting the strength we saw across geographies, product categories and customer segments. Operational results also showed momentum, with solid growth in operating income stemming from enhanced financial leverage with strong gross margins and improved operating expense productivity."